Vodafone in new tussle with govt

New Delhi, Dec. 23 -- British telecom giant Vodafone, already battling a Rs.11,200-crore tax dispute in India, has now slammed the government's recently announced norms on spectrum auction as "coercive" and "unreasonable", targeting a new proposal to make auctions mandatory.

"We are deeply concerned with these developments as these are unfair, discriminatory, contrary to the terms of licence and against public interest," Vodafone's resident director TV Ramachandran has said in a letter to telecom secretary R Chandrashekhar.

The government has come out with a fresh set of norms for spectrum allocation after its ambitious plan to raise revenues by auctioning 2G telecom radio waves met with a cold response in November, fetching bids worth less than Rs.10,000 crore.

Only 55% of the total spectrum offered nationally was sold, with operators refusing to pick up any slot in the most lucrative Delhi, Mumbai and Kolkata circles, with the two metros accounting for 40% of the total pan-India spectrum in terms of value.

On December, 13, the Cabinet approved new bidding norms for spectrum in the the 1,800-Mhz band, setting the reserve price at a discount of 30% in these three circles where no bids were received in November.

The next round of auctions, estimated to earn the government about Rs.20,000 crore, will be completed by March.

In case of licences due for extension in 2014 such as that of Vodafone, these companies can be assured of 2.5 Mhz in the 900-mhz band and licence in the 1,800-mhz band only if they participate in the auctions.

"They, in effect, are coercing participation in the auction," said Ramachandran.

Vodafone's unified access licences in Delhi, Mumbai and Kolkata are due for renewal in November 2014.

"Coerced participation in auction for assurance of any spectrum at extension of licence period is anathema both the very concept of auction as well as the provision for extension and mutual agreement of terms contained in the licence," he said in the letter.

In January, Vodafone won a $2.2-billion (Rs.11,200-crore) tax battle after the Supreme Court ruled that the British group was not liable to pay any taxes under prevailing laws.

The finance ministry then proposed in this year's budget to impose a retrospective provision for tax on some global mergers that may include Vodafone's 2007 acquisition of Hutchinson's mobile assets in India.

Global industry bodies, ranging from the US to Japan, had argued that the tax threat was "prompting a widespread reconsideration of the costs and benefits of investing in India."